Ilkay Gundogan has been targeted by Premier League clubs (Picture: Getty)

Real Madrid are reported to have reached a first-refusal agreement for Arsenal and Manchester United target Ilkay Gundogan.

The Borussia Dortmund midfielder is widely admired across Europe, after he helped guide his side to last season’s Champions League final with a string of fine performances, scoring in the 2-1 defeat to Bayern Munich.

But despite both David Moyes and Arsene Wenger being keen admirers of the 23-year-old, it appears Madrid are first in line to sign the German international, should Dortmund decide he can leave the club next summer according to Spanish newspaper Marca.

Ilkay Gundogan helped Borussia Dortmund to the Champions League final last season (Picture: Getty)

Any potential deal could pave the way for Xabi Alonso to leave the Bernabeu, with Chelsea reportedly keen on his signature.

Former Liverpool man Alonso played under Jose Mourinho in the Spanish capital and speculation has been mounting in recent weeks over a prospective move to StamfordBridge to link up with the Portuguese once again.